Result
Opportunity cost
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This calculation is for informational purposes only and does not replace advice from a qualified professional. Formulas and rates may not fit your exact situation — double-check the figures before making decisions.
How it is calculated
Opportunity cost = cash gap amount × rate ÷ 100 × number of days ÷ 365. Depending on which rate you plug in, this is either the cost of financing the gap (what it would cost to borrow that amount for the period) or the foregone income (what that money would have earned if invested instead of tied up in the cycle).
The calculation doesn't show the gap itself but its price tag: even if a company ultimately closes the gap without missing any payments, money tied up in the operating cycle is a real cost — just a hidden one, not shown as an explicit line in the income statement.
The longer the cash conversion cycle and the higher the financing rate, the more it makes sense to invest in shrinking the gap itself — rather than just covering it with a credit line year after year.